Today's Veterinary Business

AUG 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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August/September 2018 • TODAYSVETERINARYBUSINESS.COM
First, state laws regarding em-
ployee noncompete agreements
vary greatly. For example, what
might work in Colorado (a care-
fully crafted noncompete that is
restricted to duration, types of
services and geographic area)
will not work in California, where
employee noncompete agree-
ments are prohibited. While most
states permit some form of a
noncompete agreement, several
factors will determine whether
the agreement is enforceable:
Duration
Most states have statutes
or established case law
regarding how long a restriction
on competition can last after
employment ends — typically
a period of months up to a few
years. If an agreement creates a re-
striction that lasts too long under
applicable law, the agreement may
be unenforceable.
Scope of
Prohibited Activities
Employers typically have
to detail the types of services that
are prohibited, and those services
usually need to be the same or
closely related to the employee's
job responsibilities during employ-
ment. For example, it may be diffi-
cult to prevent a veterinarian who
exclusively treated animals from
joining a competing practice where
she provides only administrative
and managerial support.
Geographic Area
Though state laws differ,
a rule of thumb is that
an employer cannot prohibit an
employee from competing in
geographic areas that extend be-
yond those where the employee
provided services or had influence
during employment.
Consideration
Received by
the Employee
"Consideration" is a legal term that
refers to what someone receives in
exchange for agreeing to be bound
by a noncompete agreement. In
some states, noncompetes can be
signed only at the beginning of a
new job or at the time of promo-
tion unless a payment is provided
to the employee. In other states,
the promise of continued employ-
ment — even at-will employment
— serves as adequate consid-
eration for the agreement. This
means that it is sometimes permis-
sible for an employer to present an
employee with a noncompete and
explain that she must sign it as a
condition to remain employed.
Whether the Employee
was Discharged or
Left Voluntarily
In some states, enforceability of a
noncompete depends on wheth-
er the employer or the employee
terminated employment. If an
employee can show that she did not
engage in any type of misconduct
or other wrongdoing, the noncom-
pete may not be valid.
Pros and Cons
Before asking every employee to
sign a noncompete agreement, a
practice owner or man-
ager must consider the
pros and cons.
On the positive
side, a noncompete
can be an important
tool for protecting a
veterinary practice.
It can be devastating
to spend time and
resources recruiting, training and
integrating an employee only to
have the employee leave and take
clients and information that can be
exceptionally valuable when start-
ing or joining a competing practice.
Noncompetes also have their
downsides. They can interfere with
the recruitment of qualified talent
and limit the candidate pool, since
some people will not join a practice
if required to sign a noncompete
agreement. Even if an employer is
willing to waive the requirement
for an exceptional candidate, the
employer might create ill will with
employees not given the option.
Additionally, noncompete agree-
ments can be difficult to enforce.
Litigation can be very expensive,
and the damages caused by an
employee can be hard to prove.
Even if an employer has a carefully
drafted noncompete agreement and
successfully sues a former employee,
the actual damages could be far out-
weighed by the litigation costs. For
that reason, a practice owner should:
• Consider how much a
breaching employee actually
damaged the business.
• Weigh the significant time and
costs likely to be expended to
enforce the noncompete.
Other Options
A noncompete agreement is not
the only tool an employer can use
to protect a practice. Here are a
few alternatives:
Confidentiality
Agreement
Employees who sign a
confidentiality agreement agree not
to use or disclose the confidential in-
formation of an employer, including
customer lists, prices, business plans
and any other sensitive financial or
business data that isn't known to
the public. Employee confidentiality
agreements are fairly common and
are not nearly as controversial as
noncompete agreements.
Assignment of
Proprietary Rights
Particularly for employees
who fill technical positions and do
any kind of software development or
writing of manuals, treatment plans
or customer materials, an employer
might ask the employee to assign
any intellectual property rights in the
materials to the employer so that it
is clear the materials belong to the
employer when employment ceases.
Reliance on Trade
Secret Laws
Although state and feder-
al trade secret laws are generally not
as protective as a carefully drafted
confidentiality or proprietary rights
agreement, the laws still provide
important protections that every
employer can rely upon if a former
employee is misusing the employer's
sensitive and valuable information.
Limited Nonsolicitation
Agreements
In some cases, a simple
alternative to a broad noncompete
agreement is a narrow nonsolicita-
tion agreement. For example, the
employer might prohibit the em-
ployee from working for a certain key
competitor named in the agreement
but allow other forms of competition.
Get Legal Advice
If drafted properly, noncompete
agreements are often enforceable
and can provide a powerful tool
for protecting a practice's invest-
ment in employees. Given the
variance in state noncompete laws,
a practice owner should work with
legal counsel to draft, review and
negotiate these agreements.
Even if a noncomplete agree-
ment is permissible, remember to
consider the practicalities and po-
tential issues of using and enforc-
ing the agreement. After weighing
the advantages and disadvantag -
es, the employer might want to
consider alternatives for protecting
the practice or negotiating with a
potential employee.
Legal Lingo columnist Nicole Snyder is a partner at the Boise, Idaho, law firm
Holland and Hart.
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Noncompetes also have their downsides. They
can interfere with the recruitment of qualified
talent and limit the candidate pool, since some
people will not join a practice if required to sign a
noncompete agreement.